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| Weekly Interest Rate Tracking |
| February 4, 2009 |
Good Afternoon,
Attached is a PDF copy of Colliers Meredith & Grew's interest rate sheet that includes current and historical Treasury, LIBOR and Prime interest rates, which are updated daily with real time data from Strategic Alliance Mortgage.
We provide these updates on a weekly basis to keep our clients and colleagues aware of rate movements. We hope you find this information helpful.
DOWNLOAD INTEREST RATE SHEET (200KB)
The following Market Perspective provides insights and commentary on breaking news and emerging trends in commercial real estate finance.
Capital Markets Perspective. NEREJ:
Let’s face it, the fourth quarter was a pig, and there’s no way to put lipstick on it. To survive (in the Darwinian context), banks and portfolio lenders had (and continue) to reassess risk and conform to a market where volatility is the only constant; therefore, balance sheets had to be cleaned up, toxic assets liquidated or marked to market, and capital ratios bolstered.
For the most part, portfolio lenders were sidelined this past quarter. Three factors were central to this slowdown: first, the fourth quarter is a historic offseason for life companies; second, new premiums took a hit in 2008; and third, spreads on alternative investments were at historically wide levels.
Volatile pricing benchmarks, such as corporate bond spreads, made it difficult to lock rates throughout 2008 but portfolio lending slowed in the fourth quarter because real estate allocations were either depleted or frozen by credit officers prior to year-end. This is consistent with previous years but declining premiums may extend the slowdown. LIMRA reported new premiums for individual life insurance dropped 12% year-over-year in the third quarter. This snapped seven consecutive years of growth. A confluence of fallout from the credit crisis and the inverse scenario of soaring claims against declining premiums will require insurers to preserve capital in a manner that does not jeopardize creditworthiness or shareholder equity.
Life companies will also be making relative value decisions that could divert capital to higher-yielding alternative investments, such as CMBS and discounted note purchases. Of the capital allocated to commercial real estate, a large percentage will likely be kept in-house to focus on rollovers within existing portfolios. The bottom line: Fiscal Year 2009 real estate allocations may be in the crosshairs. As a result, most originators still await their marching orders.
Despite the headwinds, life insurers will enter the year in a position of strength. They will cherry pick low-leverage, no-risk deals. Larger transactions of $35 million and up will probably need to be bulletproof in order to stand a chance. Pricing will continue to adjust with the market, but approximate spreads of 425 to 500 basis points over comparable term treasuries will be typical. Portfolio lenders do not want to take on a lot of risk and will need to get paid well to do so. On a positive note, many insurers have eased prepayment penalties and/or begun negotiating discounted note sales to recycle capital and clean up balance sheets, thus allowing borrowers to retire loans early at par or even sub-par values.
| Capital Sources & Quotes |
| Capital Source |
Life Company |
| Property Type |
Office Portfolio – Single Tenant |
Property Size |
Approximately 1.2M SF |
Quote for Securitized Deal |
No |
Quoted Deal Amount |
$84,000,000 |
Deal Type |
Permanent - Fixed Rate Refinance of 100% of discounted note buyback |
Quoted Rate |
7.5% |
LTV |
50% |
Term/Amortization |
10/30 |
Disclaimer |
Sourced from Strategic Alliance Mortgage |
| Date |
Week of January 12th, 2009 |
U.S. Treasury to Sell $67 Billion in Long-Term Debt (Update1)
Bloomberg.com — February 4, 2009
The Treasury plans to sell $67 billion in long-term debt next week, revive auctions of seven- year notes and consider further steps to finance a record budget deficit as tax revenues collapse. The government this month will issue seven-year notes for the first time since 1993, and plans to boost the frequency of 30-year bond sales, the Treasury said in a statement today on its quarterly refunding of long-term debt.
Treasury Notes Fall as U.S. Sets Record Auctions for Next Week
Bloomberg.com — February 4, 2009
Treasury notes fell as the government said it will sell a record $67 billion in notes and bonds next week and a private report showed service industries contracted in January at a slower pace than forecast.
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| Please contact the Capital Markets Group at Colliers Meredith & Grew with any financing questions.
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Colliers Meredith & Grew is a Boston-based commercial real estate company with integrated service groups including Brokerage, Capital Markets, Counseling & Valuation, Development & Advisory, Investment Sales, and Property & Asset Management. In addition to representing its core clients in New England, Colliers Meredith & Grew provides national and international real estate services to its multi-market clients as a member of Colliers International and as an owner/member of Strategic Alliance Mortgage LLC (SAM). Colliers International is a worldwide affiliation of independently owned and operated companies in more than 293 offices in 61 countries. |
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